Lesson 1: A Perspective On Enrepreneuship

The Entrepreneurial Mind
LESSON 1: A PERSPECTIVE ON ENREPRENEUSHIP

Entrepreneurship is a very important component of a capitalist economy like the Philippines. It thrives in
economy systems that support innovation and hard work. When entrepreneurship become successful, the nation
is immensely benefited.
What is entrepreneurship and how does it affect the economic well-being of many people? What is the
task of the entrepreneur regarding economic development?
Entrepreneurship and Economic Development

Economic development is a scheme aimed at improving the living standards of the nation’s citizenry. To
achieve economic development goals, proper management of the following elements is necessary:
1. human resources (labor supply, education, discipline, motivation);
2. natural resources (land, minerals, fuel, climate);
3. capital formation (machines, factories, roads); and
4. technology (science, engineering, management, entrepreneurship).
What is Entrepreneurship?
Entrepreneurship refers to the economic activity of a person who starts, manages, and assumes the risk of a
business enterprise.
Table 1. An Example of Entrepreneurship Activity

Entrepreneur’s Concern Problem at Hand Entrepreneur’s Action
1. Identifying an economic need 1. High income families are not 1. Establish a high school
satisfied with the services provided education with higher standards
by high schools in their area. than the current high schools are
providing.
2. Assembling resources required 2. Resources must be made 2. Acquire funds, hire people,
available. construct buildings, and the like.
3. Assuming risk 3. Venture must be made. 3. Prepare project study, advertise,
maintain good relationship with
employees and customers, among
others.
The Entrepreneur’s Task

If all the requirements in a capitalist economy are in place, the entrepreneur can assume his assigned role in
the development of the economy. A review of the contributions of entrepreneurs will reveal that no business, big
or small, started without the hand of the entrepreneur. Even if many of these businesses failed to survive, still a
sizeable number of development proceeded to make the capitalist economy a viable concern. This is made
possible because the surviving enterprises are responsible for providing the following:
1. products and services for customers and producers;
2. employment;
3. taxes;
4. demand for suppliers’ products and services; and
5. training facilities for future entrepreneurs.
DR. D.A.FEDERIZO
Land Labor Capital

(Natural resources) (Human Resources) (Finacial Resources)
Entrepreneur
Production Process
Finish Goods and

Services
Figure 1. The Entrepreneur’s Task
In the attempt to make profits, the entrepreneur performs the following specific functions:
1. to supply the necessary capital;
2. to organize production by buying and combining inputs like materials and labor;
3. to decide on the rate of output, in the light of his expectation about demand; and
4. to bear the risk inherent to the venture.
Entrepreneurship and Innovation

Innovation is the introduction of a new method, procedure, custom, device, among others. Innovation
could be any of the following:
1. new product;
2. new process of production;
3. substitution of a cheaper material in an unaltered product;
4. reorganization of production, internal function, or distribution arrangement leading to increased
efficiency, better support for a given product, or lower cost; or
5. improvement in instruments or methods of doing innovation.
a. Invention – the discovery or devising of new products and processes
b. Development – the process by which the ideas and principles generated from the stage of invention
are embodied in concrete products and techniques; and
c. Innovation – the actual introduction of a new product or process.
Examples of successful innovations are the following:

1. cordless microphone;
2. microwave oven;
3. cellular phone;
4. kung fu fight scenes developed by Bruce Lee in the movies;
5. karaoke music appliance;
6. use of Lacer in the treatment of eye conditions; and
7. use of computers by engineering and architects in the design of buildings.
DR. D.A.FEDERIZO
New Ventures and long-term Enterprises
The transaction from a new venture to a successful long-term enterprise consists of at least four major stage.
1. prestart-up stage;
2. start-up stage;
3. early growth stage; and
4. late growth stage.
In the start-up stage, the following activities are undertaken:

1. formulation of the business
2. generation of necessary capital;
3. purchase of facilities and equipment;
4. constructing prototype products; and
5. testing the market.
Rewards for Successful Entrepreneurship

The Factors of Production and Their Rewards
Factors or Production Economic Reward Limiting Factor for
Rewards Received
Land rent supply and demand
Capital interest industry rates / government
mandated rates
Labor wages / salary supply and demand legislation
Entrepreneur profits skill of entrepreneur
The Entrepreneur’s Predicament

Innovation and Its Possible Effects on Competing Firms
Entrepreneur Entrepreneur Entrepreneur
1 2 3
Year 1 introduce inactive inactive
innovative
product
Year 2 reap introduce inactive
moderate innovative
profits product
Year 3 maximize reap introduce
profits moderate innovative
profits product
Year 4 profits maximize reap
decline profits moderate
profits
Year 5 introduce profits maximize
innovative decline profits
product
DR. D.A.FEDERIZO
Entrepreneurship and Business Size
Examples of innovations
1. offering business services during Sundays and holidays;
2. manufacture and sale of new products; and
3. selling on a deferred payment scheme.
Ask yourself:
1. Why is entrepreneurship an important component of economic development?
2. What role of does the entrepreneur play?
3. In what ways are entrepreneurs useful to suppliers?
4. Why is innovation an important entrepreneurship activity?
5. What does “innovation” consist of?
Suggested Items for Research

1. Identify a business in your area, which became successful due to innovation. Write about the role played
by innovation in its success.
2. Prepare a list of five innovative products or services currently introduced in the market.
DR. D.A.FEDERIZO

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The Entrepreneurial Mind

LESSON 1: A PERSPECTIVE ON ENREPRENEUSHIP

Entrepreneurship and Economic Development

Table 1. An Example of Entrepreneurship Activity

The Entrepreneur’s Task

Land Labor Capital

Finish Goods and

Figure 1. The Entrepreneur’s Task

Entrepreneurship and Innovation

Examples of successful innovations are the following:

In the start-up stage, the following activities are undertaken:

Rewards for Successful Entrepreneurship

The Entrepreneur’s Predicament

Suggested Items for Research

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